Who is Jesús González Cervantes?
Jesús González Cervantes is an expert from the Centro de Estudios Monetarios de Latinoamérica (Cemla) and the head of the Economic Statistics and Remittances Forum for Latin America. His insights are crucial in understanding the proposed remittance tax and its implications.
Understanding the Proposed Tax
According to González Cervantes, the proposed tax will only apply to cash remittances. If a Mexican sender uses a credit or debit card for the transfer, they will not be subject to the tax. This incentivizes digital or banked transactions.
Between January and April, Mexico received $19,501 million in remittances. Of this total, 99% were sent electronically to households.
González Cervantez clarified that while most transfers are made in cash, the electronic transfer to Mexico is done through a digital platform. Cash and money orders accounted for 0.8% and 0.2%, respectively, of the total remittances.
The tax applies to both documented and undocumented Mexican migrants sending cash remittances. Documented migrants will have the tax credited in their annual declaration, while undocumented migrants will not receive a refund.
Government of Mexico’s Reimbursement Plan
According to President Claudia Sheinbaum, if the 1% tax on cash remittances is approved, the Mexican government will reimburse affected citizens through the “Paisano” card from Financiera del Bienestar (Finabien).
Mexican nationals in the US can acquire these cards at consulates and use them for digital transfers. The estimated cost for reimbursement is around 5,000 million pesos based on the current cash remittance volume.
Sheinbaum emphasized that the tax targets cash remittances sent through non-banking institutions rather than traditional banking channels.
Evolution of the Remittance Tax Initiative
The proposed remittance tax is part of the Republican Party’s budget package currently under discussion in the US Congress, set to take effect next year.
Since May 2025, when it was introduced in the House of Representatives, this particular chapter has undergone multiple revisions. Initially, Republican lawmakers proposed a 5% tax on remittances, estimating $22,000 million in revenue over a decade for border security and anti-drug efforts.
Following discussions in the House, the proposed tax rate was reduced to 3.5% after lobbying by Mexican authorities. Now, as the Senate of the US debates this initiative, the tax rate has been lowered to 1%, projecting a $10,000 million surplus over the next decade.
During Donald Trump’s presidency, there was also a proposal to tax remittances; however, it was rejected by the US Congress.
Key Questions and Answers
- What types of remittances will be taxed? Only cash remittances sent without using banking institutions will be subject to the 1% tax.
- Who is exempt from the tax? Mexican migrants using credit or debit cards for remittance transfers will not be taxed.
- How will the Mexican government reimburse affected citizens? The government plans to use the “Paisano” card from Financiera del Bienestar (Finabien) for reimbursement.
- What is the current status of the proposed tax? The tax is part of a broader budget proposal by the US Republican Party, currently under discussion in Congress.
